Guzman v. Visalia Community Bank
71 Cal. App. 4th 1370, 84 Cal. Rptr. 2d 581 (1999)
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Rule of Law:
Under California Code of Civil Procedure § 998, a statutory offer to compromise is not terminated by an offeree's critical or disparaging comments; the offer remains open for acceptance during the statutory period unless it is unequivocally rejected, revoked by the offeror, or expires by its terms.
Facts:
- Marie Guzman was laid off by her employer, Visalia Community Bank, and subsequently filed a lawsuit against the bank for sexual discrimination and creating a hostile work environment.
- During a settlement conference in March 1996, Visalia Community Bank offered Guzman $60,000, which she immediately rejected.
- On May 21, 1996, the bank's attorney, Clifford Kemper, mailed a formal written settlement offer of $60,000 to Guzman's attorney, Linda Luke, pursuant to Code of Civil Procedure § 998.
- In subsequent telephone conversations between the attorneys, Luke characterized the offer as 'insulting and demeaning' and noted that it did not cover her attorney's fees.
- During these conversations, Luke did not state that she was accepting or rejecting the offer.
- On the evening of June 11, 1996, after learning of an adverse tentative ruling on a summary judgment motion, Luke faxed a letter to Kemper accepting the bank's § 998 offer.
- The acceptance occurred within the 30-day statutory period provided for by § 998.
Procedural Posture:
- Marie Guzman filed a complaint against Visalia Community Bank in the Tulare County Superior Court, which is a trial court.
- Visalia Community Bank filed a motion for summary judgment.
- The trial court first considered whether Guzman's acceptance of the bank's § 998 offer was valid.
- The trial court ruled that the disparaging comments made by Guzman's counsel constituted a rejection, rendering the subsequent acceptance ineffective.
- The trial court granted Visalia Community Bank's motion for summary judgment, entering judgment in its favor.
- Marie Guzman, as the appellant, appealed the trial court's rulings to the California Court of Appeal, an intermediate appellate court, with Visalia Community Bank as the respondent.
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Issue:
Does an offeree's communication that disparages a settlement offer made under California Code of Civil Procedure § 998, but does not explicitly reject it, constitute a rejection that terminates the offeree's power to accept the offer?
Opinions:
Majority - Levy, J.
No. An offeree's disparaging comments about a settlement offer under California Code of Civil Procedure § 998 do not constitute a rejection that terminates the offer. The court reasoned that the policy of encouraging settlements and the need for certainty in the § 998 procedure override general contract law principles that might treat equivocal conduct as a rejection. Referencing Poster v. Southern Cal. Rapid Transit Dist., which held that a counteroffer does not terminate a § 998 offer, the court extended this logic to other negotiating tactics. The court noted that criticism of an offer is a normal part of settlement negotiations and should not be construed as a final rejection, as doing so would discourage the negotiation process that § 998 aims to promote. To avoid uncertainty and frequent disputes over whether an offer remains open, the court established a bright-line rule: a § 998 offer remains valid until it is unequivocally rejected, revoked by the offeror, or the statutory period expires. Ms. Luke’s comments were not an unequivocal rejection, so her subsequent acceptance was valid.
Analysis:
This decision establishes a significant 'bright-line rule' for California's statutory settlement offer procedure, intentionally diverging from traditional contract law. By requiring an 'unequivocal' rejection, the court provides clarity and protects an offeree's ability to negotiate without inadvertently terminating a § 998 offer. This ruling strengthens the position of the offeree, allowing them to criticize an offer, make inquiries, or even propose a counteroffer while keeping the original statutory offer as a fallback option unless the offeror formally revokes it. The decision prioritizes the legislative goal of promoting settlements over the strict application of common law contract principles.
